BusinessGreen: Next decade 'critical' for UK's energy future

16/02/2015

The coming decade will be crucial for the development of an affordable, low carbon energy system in the UK, according to the Energy Technologies Institute (ETI).

The opportunity to shift away from carbon-heavy energy production has never been more apparent: out of a total power capacity of approximately 90GW in 2010, 16GW will be decommissioned by the end of 2015, opening the way for offshore wind, biomass, and fossil fuel generation with carbon capture and storage (CCS) technology, alongside more energy-efficient practices.

In a new report released last week, the public-private ETI outlines how the UK can drive a transition to a low carbon energy system by 2050 by developing, commercialising, and integrating known, but currently underdeveloped, clean technologies and solutions.

But for this transition to happen, crucial decisions need to be taken over the next 10 years to avoid wasting investment and ensure the 2050 climate target of reducing emissions 80 per cent on a 1990 baseline remains achievable.

"2050 may seem a long way off but there is no time to invent and deploy a set of novel breakthrough technologies and the cost of adaptation will inevitably be higher than the cost of mitigation," said Andrew Haslett, chief engineer at the ETI.

"In the next decade the UK should focus on ensuring it is prepared by developing options and exploring trade-offs between particular sets of technologies, and also testing technical, business and regulatory models at scale to give stakeholders the confidence they need to move to full-scale implementation."

The contribution of bioenergy and CCS is seen as particularly crucial for the UK's future energy system. According to the ETI, if either of these technologies does not feature it would at least double the cost of delivering climate change targets from around one per cent of GDP to two per cent - putting the value of CCS and bioenergy to the energy system at around £200bn each.

Critics have said burning biomass may actually increase emissions if virgin forests are felled and chipped before being transported thousands of miles to be burnt. But the ETI says when used with CCS, biomass can deliver baseload capacity to support renewables with negative emissions by virtue of storing the carbon that plants and trees take from the atmosphere. In turn, this can offset emissions from areas that are harder to decarbonise, such as transport.

However, the report notes "CCS has experienced a number of false starts and frustrations in the UK" and that while two projects remain in the running for the government's £1bn commercialisation competition, more storage sites and potential clusters must be found to bring more projects forward. According to the ETI, the cost of six shoreline hubs feeding fewer than 20 storage facilities would cost £5bn in the years to 2050, which means new market structures are needed very soon to attract the required investment.

The report also considers fracking, noting that while the UK boasts a "significant potential shale gas resource" it is too early to say whether it will prove commercially viable and the UK is unlikely to see a repeat of the huge fracking boom in the US. Moreover, the ETI warns "the hype surrounding shale gas has fed through into an anti-renewables message heard increasingly loudly in the boardrooms of companies considering investment".

Meanwhile, energy efficiency is considered "an urgent development priority" given the net cost of incorporating many efficiency measures in new assets is far cheaper than retrofitting at a later date and can generate immediate returns.

A similar point is made in a new TUC report, also published last week, which criticised the government's "failing" energy efficiency strategy for costing UK businesses millions of pounds every year. It calls for more effective regulations and incentives and says handing the Green Investment Bank borrowing powers and directing the Green Deal Finance Company to invest in commercial energy efficiency will improve access to finance.

"Clamping down on the 'Great British Energy Waste' is a win-win for businesses, the government and the environment," said TUC general secretary Frances O'Grady. "Even small businesses can save far more from energy efficiency measures than switching suppliers.

"Better energy regulations backed by access to finance, a one-stop shop for energy advice, and encouraging green workplaces would all help tackle this pointless and expensive frittering away of energy."

As both reports make clear, the need for early action to ensure a cost-effective shift to a low carbon economy has never been clearer.